Doctors often struggle to qualify for mortgage loans for several key reasons. First, most physicians have significant student debt from medical school. This negatively impacts their credit history. A medical career also takes time to establish, and it can be challenging to offer proof of employment and income while in residency.
However, lenders understand that fewer doctors default on their loans as compared to the general public. So they create mortgages that are specifically designed to help physicians achieve their dream of owning a home.
Physician mortgages offer tailored financing and refinancing options for medical professionals. Read on to learn more about physician mortgage loans.
A physician mortgage loan is a mortgage program tailored to medical practitioners. Physician mortgages help doctors buy or refinance a primary residence. However, you cannot use them on a second home or a vacation home. A physician mortgage is different from a conventional mortgage in several ways:
Physician mortgage loans have high limits, most starting at $1 million, and can go higher depending on your lender and how much you’re financing. For example, if you are seeking out 100 percent financing, you could be capped off at $1 million. If you are looking for 70 percent financing, the threshold could go upto $2.5 million.
Since student debt is not among the loans counted against you, a significantly broader pool of properties will be available for you to choose from.
However, you have to live in the home you’re buying or refinancing to qualify for a physician mortgage or physician mortgage refinance. You cannot use these types of mortgages to finance an investment property, a second home, or a condo.
Physician mortgages are open for medical doctors with either an MD (Doctor of Medicine) degree or a DO (Doctor of Osteopathic Medicine) degree.
Some physician loan mortgages are also available to dentists, orthodontists, veterinarians, and podiatrists that hold any of the following degrees:
Your loan limits will depend on your level of training and experience. Usually, attending physicians can access higher loan amounts than fellows, residents, and interns.
Compared to conventional mortgages with more strict qualification requirements, physician mortgage loans may be desirable to new doctors looking to buy a home. However, the following are some of the key pros and cons to consider.
Physicians need an average credit score of 700 to qualify for most physician mortgage loans. Some lenders will allow for a 620 credit score depending on the borrower’s specific case.
Remember that even though medical school debt is not counted for physician mortgage loans, lenders can examine other factors to check if you qualify. The ideal DTI is about 43%, and the lower the number, the better your chances of qualifying. Your lender will check your credit card debt, rent payments, car loans, child-related expenses such as alimony, and all other costs to determine your DTI.
To calculate your DTI, the basic formula is:
(total monthly debt payments + total monthly housing)/monthly gross salary
Buying a home is a considerable investment for everyone, including physicians. However, medical practitioners have a unique set of advantages and challenges when looking for a mortgage. Always weigh the pros and cons of physician mortgage loans before you take the plunge into homeownership.